Accounting Unit III Homework

  

Question1

Which of the following is true of accrual
basis accounting and cash basis? accounting?

A. Cash basis accounting records all
transactions.

B. Accrual accounting records revenue only
when it is earned.

C. Accrual accounting is not allowed under GAAP.

D. All of the above are true.

Question2

Get Fit Now gains a client who prepays $540
for a package of six physical training sessions. Get Fit Now Get Fit Now
collects the $540 in advance and will provide the training later. After four
training? sessions, what should Get Fit Now Get Fit Now report on its income
statement assuming it uses the accrual basis accounting? method?

A. Service revenue of $360

B. Service revenue of $540

C. Unearned service revenue of $360

D. Cash of $180

Question3

The revenue recognition principle requires

A. time to be divided into annual periods
to measure revenue properly.

B. revenue to be recorded only after the
business has earned it.

C. revenue to be recorded only after the
cash is received.

D. expenses to be matched with revenue of
the period.

Question4

South Shore Magazine sells subscriptions
for $60 for 12 issues. The company collects cash in advance and then mails out
the magazines to subscribers each month.

Apply the revenue recognition principle to
determine

a. when South Shore Magazine should record
revenue for this situation.

b. the amount of revenue South Shore
Magazine should record for eight issues.

a. South Shore Magazine should record
revenue when?

it collects cash from

or

it mails magazines to

or

it receives the order form from

the
subscribers.

Question5

Suppose on January 1 Antonio?’s Tavern
prepaid rent of $6,000 for the full year.

At June 30?, how much rent expense should
be recorded for the period January 1 through June 30??

At June 3030?, Antonio?’s Tavern should
record ?$__________ of rent expense.

Question6

Which of the following is an example of a
deferral? (or prepaid) adjusting? entry?

A. Recording the usage of office supplies
during the period.

B. Recording salaries expense for employees
not yet paid.

C. Recording revenue that has been earned
but not yet received.

D. Recording interest expense incurred on a
notes payable not due until next year.

Question7

Magazine collects cash from subscribers in
advance and then mails the magazines to subscribers over a? one-year period.

Requirements

1. Record the journal entry to record the
original receipt of $150,000 cash.

2. Record the adjusting entry that Southern
Magazine makes to record earning $9,000 in subscription revenue that was
collected in advance.

3. Using? T-accounts, post the journal
entry and adjusting entry to the accounts involved and show their balances
after adjustments. ? (Ignore the Cash? account.)

Question8

The adjusted trial balance shows

A. assets and liabilities only.

B. account balances after adjustments.

C. revenues and expenses only.

D. amounts that may be out of balance.

Question9

First Class Maid Company has journalized
the adjusting entries for the period ending December 31?, 2016?, and posted the
adjustments to the following? T-accounts.

?(Click the icon to view the? T-accounts.)

.0/msohtmlclip1/01/clip_image002.png”>

Using this? data, prepare an adjusted trial
balance.

Question10

In recording adjusting? entries, Reagan
Financial Advisors failed to record the adjusting entries for the following
situations.

?(Click to view the adjusting? entries.)

a. Office supplies on? hand, $100.

b. Accrued? revenues, $5,000.

c. Accrued interest? expense, $250.

d. Depreciation, $800.

e. Unearned revenue that has been? earned,
$550.

Determine the effects on the income
statement and balance sheet by identifying whether? assets, liabilities, ?
equity, revenue, and expenses are either overstated or understated. Use the
following table. Adjustment a has been provided as an example.

Begin by determining the effects for
adjusting entries b. and c. and then determine the effects for adjusting
entries d. and e. ?(Leave unused cells? blank.)

Question11

Fishing Charters has collected the
following data for the December 31 adjusting? entries:

?(Click the icon to view the? data.)

a. The company received its electric bill
on December 20 for $250 but will not pay it until January 5.? (Use the
Utilities Payable? account.)

b. Taylor purchased a three?-month boat
insurance policy on November 1 for $2,400. Taylor recorded a debit to Prepaid
Insurance.

c. As of December ?31, Taylor had earned
$2,500 of charter revenue that has not been recorded or received.

d. Taylor?’s fishing boat was purchased on
January 1 at a cost of $76,500. Taylor expects to use the boat for ten years
and that it will have a residual value of $6,500. Determine annual depreciation
assuming the? straight-line depreciation method is used.

e. On October ?1, Taylor received $8,500
prepayment for a? deep-sea fishing charter to take place in December. As of
December ?31, Taylor has completed the charter.

Requirements

1. Journalize the adjusting entries needed
on December 31 for Taylor Fishing Charters. Assume Taylor records adjusting
entries only at the end of the year.

2. If Taylor had not recorded the
adjusting? entries, indicate which specific category of accounts on the
financial statements would be misstated and if the misstatement is overstated
or understated.

And so on

Question12

A worksheet

A. is a financial statement that reports
net income during the period.

B. is a ledger listing the account balances
and changes in those accounts.

C. is an internal document that helps
summarize data for the preparation of financial statements.

D. is a journal used to record
transactions.

Question13

The worksheet of Moore?’s Landscaping
Services follows but is incomplete.

?(Click the icon to view the? worksheet.)

Calculate and enter the adjusted account
balances in the Adjusted Trial Balance columns.

Question14

On August ?1, 20162016?, Blue Design paid
$66,000 for store rent covering the 12?-month period ending July 31?, 2017.

Requirements

1. Journalize the entry on August 1 by
using the alternative treatment of deferred expenses.

2. Record the December 31?, 2016 adjusting
entry.

Requirement
1. Journalize the entry on August 1 by using the
alternative treatment of deferred expenses. ?(Record debits? first, then
credits. Select the explanation on the last line of the journal entry? table.)

And so on

Question15

Friendly Faces Pack’n
Mail completed the following transactions during 2016?:

?(Click the icon to view the? transactions.)

Nov. 1 Paid
$7,500 store rent covering the five?-month period ending March 31?, 2017.

Nov. 1 Paid
$4,800 insurance covering the six?-month period ending April 30?, 2017.

Dec. 1 Collected
$6,000 cash in advance from customers. The service revenue will be earned
$1,000 monthly over the six?-month period ending May 31?, 2017.

Dec. 1 Collected
$3,900 cash in advance from customers. The service revenue will be earned
$1,300 monthly over the three?-month period ending February 28?, 2017.

Read
the requirements

1 Journalize the
transactions assuming that Friendly Faces debits an asset account for prepaid
expenses and credits a liability account for unearned revenues.

2. Journalize
the related adjusting entries at December? 31, 2016.

3. Post the
journal and adjusting entries to the? T-accounts, and show their balances at
December? 31, 2016. ?(Ignore the Cash? account.)

4. Repeat
Requirements? 1-3. This time debit an expense account for prepaid expenses and
credit a revenue account for unearned revenues.

5. Compare the
account balances in Requirements 3 and 4. They should be equal.

Nov.? 1: Paid
$7,500 store rent covering the five?-month period ending March 31?, 2017

Nov. 1 Paid
$4,800 insurance covering the six-month period ending April 30, 2017.

Dec. 1 Collected
$6,000 cash in advance from customers. The service revenue will be earned
$1,000 monthly over the six-month period ending May 31, 2017.

Dec. 1 Collected
$3,900 cash in advance from customers. The service revenue will be earned
$1,300 monthly over the three-month period ending February 28, 2017.